How to create volumetric/smoke material in blender game engine?
The trick: Set the object to 'shade smooth' and use the surface normal.
It doesn't work everywhere (such as the left edge of the object, but it works well enough in a lot of cases.
I use this trick quite often, for things like fire, which you can do with a single distorted sphere and some UV-scroll.

Note that this requires GLSL, and uses a node material.

If you mix it with a cloud texture you can make smoke/clouds:


The blend for the cloud can be downloaded from blenderartists